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Student loan changes save mid-earners while hitting low-earners hard

Graduates working in hospitality may suffer.

Graduates working in hospitality may suffer. Photo: AAP

University graduates earning as much as $75,000 a year will save hundreds on their student loan debt, while those taking home less than the median wage will be hit with repayments for the first time.

Analysis by The New Daily shows many mid-earners will bank hundreds of dollars a year as a result of the government’s cost-saving reforms to the Higher Education Loan Program (HELP).

At the same time, graduates taking home as little as $45,000, who were previously exempt from debt repayments, will lose hundreds of dollars a year.

Changes in the income threshold brackets mean a graduate earning $75,000 a year will pay $375 less than before, with his or her annual bill shrinking from $4125 to $3750.

A graduate earning $45,000, far less than the median wage of about $55,000, will pay $450, compared to nothing previously. A graduate earning $65,000 will pay $650 less each year, while a graduate earning $60,000 will pay $600 less.

Graduates with incomes in brackets above the $75,000 threshold will pay the same or more than before.

Under measures aimed at recouping $245 million in higher education debt, the government has lowered the income threshold over which graduates have to start paying back their student loans from about $56,000 to $45,000.

The changes will take effect from July 1 after the government on Tuesday secured crossbench support to push through the reforms in the face of opposition from Labor and the Greens.

university graduates

The government has not explained why middle earners get relief while lower earners pay more. Photo: Getty

The government has said the new thresholds will ensure more consistent debt repayments, although it has not commented on their disproportionate impact on low-earners.

“For a number of years now, the HELP repayment thresholds have been rising relative to earnings,” Assistant Minister for Vocational Education and Skills Karen Andrews told Parliament earlier this year.

“The higher growth in average weekly earnings has meant that people have dropped from a higher repayment threshold to a lower one, or have dropped out of the repayment stream altogether as the thresholds rise faster than their income growth.”

The National Union of Students has slammed the changes, however, arguing they will disproportionately hit low-earners.

“Lowering the repayment threshold will burden low-income graduates,” NUS national president Mark Pace told The New Daily.

“The justification of the HECS repayment system has always been that students repay their student loans once they receive private benefit from their qualifications – the proposed minimum repayment threshold is just over half of the average Australian wage, and graduates will be paying back loans without any private benefits from their qualification.”

The Department of Education was contacted for comment.

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